Local ShoppingLowe’s to give $100M in bonuses to frontline workers

Lowe’s to give $100M in bonuses to frontline workers

Dive Brief:

  • Lowe’s on Tuesday reported net sales of $24.9 billion, down 9.1% year over year, and net earnings of $2.7 billion, a decrease of 10.6%. The retailer said that comparable sales fell 1.6% in Q2 but that Pro and online sales growth partially offset lower DIY discretionary demand.
  • Operating income for Q2 fell to $3.9 billion from $4.2 billion a year ago, a decrease of 8.1% year over year. CEO Marvin Ellison said strong seasonal sell-through placed Lowe’s in a better inventory position than last year. Inventory for the quarter ending Aug. 4 was at $17.4 billion, down $1.9 billion year over year.
  • Lowe’s also said it’s seeing a return on its investments in its Total Home Strategy, which includes working to increase the market share of Pros who buy from Lowe’s and growing its online business. In recognition of front-line associates’ support in pursuing the company’s goals, Lowe’s said it plans to award over $100 million in discretionary and profit-sharing bonuses this quarter. 

Dive Insight:

Disposable personal income and home price appreciation are the home improvement sector’s two leading demand drivers, Ellison said. Price appreciation has slowed but is still up compared to pre-pandemic levels. Disposable income, however, remains pressured by inflation and interest rates.

As a result, Ellison said, “home improvement shoppers remain cautious with their spend.” But Ellison also said that improvement in consumer sentiment must sustain over time before that translates to spending.

Executive Vice President of Merchandising Bill Boltz said on an earnings call that lawn and garden performed well in Q2 due to a strong partnership with the company’s live goods vendors. Those vendors helped the company respond effectively to changing weather, allowing the company to stretch spring into the summer months.

Boltz also said on the call that Lowe’s “saw an increase in smaller, instant gratification projects that improve outdoor spaces at an affordable price, like landscaping projects and pre-potted plants.” The company’s outdoor power equipment and hardware segments also performed well last quarter.

Lowe’s has expanded its merchandising services teams to over 30,000 associates across 1,700 stores. According to Boltz, this move frees up employees to spend more time serving customers. Boltz said the company plans to add merchandising services team assistant store managers.

Ellison also offered insight into another bit of industry-specific consumer behavior that’s informing the company’s near and long-term outlook.

“Looking ahead, it’s encouraging to consider that home improvement projects are typically postponed rather than canceled and home improvement spend as a percentage of home equity is below the historical average, a positive indicator for medium-term demand and consumer sentiment improves,” Ellison said.

In anticipation of a positive medium to long-term outlook, the company is maintaining its prior full-year guidance. Lowe’s expects total sales to range from $87 billion to $89 billion, a comp sales decline of 2% to 4% and capital expenditures of $2 billion.

Analysts at Telsey Advisory Group, led by Joe Feldman, said the company beat expectations and concurred with its take on what’s ahead.

“In the near term, the industry faces headwinds related to the weak housing market trends, consumers remaining cautious with spending, especially on big-ticket items and projects, and continued normalization from the pandemic-related gains from the past three years,” Feldman said in a note published ahead of Tuesday’s call. 

“However, in the long term, Lowe’s should remain a share gainer and benefit from its Total Home Strategy —focusing on the Pro, enhancing digital, improving installation services, driving localization, and elevating the assortment.”

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